Speaking to Nest Egg in the wake of the Productivity Commission’s explosive report on the superannuation sector, the Grattan Institute’s Brendan Coates said the findings were “damning” but there were also a number of surprising recommendations, and omissions.

“The one thing that the Productivity Commission did not recommend was a government superannuation fund to provide competition,” he said, noting Peter Costello’s suggestion last year that the Australian sovereign wealth fund, the Future Fund, could also manage superannuation savings.

The Productivity Commission’s recommendations included new workforce entrants choosing from a top 10 list of super funds, as well as deciding whether to have insurance tacked on.

“I think [the Productivity Commission’s] essential approach for now is to now certainly to look at trying to squeeze margins, squeeze fees by getting more competition, by getting people to make better choices and makes funds work really hard to become one of those essentially top ten funds that are going to be listed on the ATO’s website,” Mr Coates said.

However, should these recommendations fail to boost competition, there is “scope … to move down that [government superannuation scheme] path”.

The director of Hewison Private Wealth, Nathan Lear, added that there could be merit in a low-fee, Future Fund-style super scheme for vulnerable workers.

He told Nest Egg, “The Future Fund is a pretty high-quality fund in terms of the investments in there and if there was a way for the government to subsidise that, perhaps with low fees for consumers, potentially that could have merit because often that's when people are most vulnerable when they've got those smaller balances and there's for example, account keeping fees and they're going to be the same in some cases regardless of your balances.

“Quite often the investment fees are tied to a percentage based fee so that should be fair, no matter how much you've got but often it's other fees like account keeping fees and you know, insurance and things like that so I think it's potentially got merit.”

However, economist and managing director Market Economics, Stephen Koukoulas, has a different take, tweeting in early June:

Utterly freakish notions doing the rounds of putting superannuation into a few funds or even just the Future Fund.
Shows a lack of awareness of concept of too big to fail, liquidity & the issues which drove the 2008 financial crisis
Let's hope these whacky ideas die a quick death

— Stephen Koukoulas (@TheKouk) June 2, 2018